Event: Recently, China Resources Wandong announced the 2014 third quarterly report. During the reporting period, the company achieved sales revenue of 443 million yuan, down 9.52% year-on-year. The net profit attributable to shareholders of listed companies was 13.98 million yuan, down 24.51% year-on-year and EPS 0.086 yuan.
Comments:
Multiple factors affected the company's operations, and the performance during the transition period was weak: the company's revenue in the first three quarters fell by 9.52%, and the net profit fell by 24.51%. The parent company realized operating income of 395 million yuan, down 5.45% year-on-year and net profit of 41.73 million yuan. It fell by 11.62% year-on-year. We believe that the company plans and implements the transfer of ownership for a long time. Although the market operation is still carried out normally, it will inevitably be affected by related matters in the management and management, and it is still in the transition period, which will adversely affect the business performance. On the other hand, due to the influence of the national government procurement rhythm, the procurement of low-end imaging equipment of grassroots medical institutions has been basically completed, which has led to the poor operation of the company's wholly-owned subsidiary China Resources Medical Devices. The loss in the first half of the year was 6.04 million yuan. The overall performance of the company has been a certain drag. In addition, the company's previous sales assessment mechanism is limited to institutional reasons, more assessment of sales indicators, product pricing, marketing model, competition strategy and other aspects in the current domestic medical equipment procurement and sales environment is in an unfavorable situation, to a certain extent affect the original There are sales of products and volume of new products.
The policy is beneficial to domestically produced devices, and the company is expected to benefit: Since the beginning of this year, the relevant policies of the state have promoted the localization of medical devices. Recently, the State Health Planning Commission and the Ministry of Industry and Information Technology jointly held a conference to promote the development and application of domestic medical equipment. Li Bin, director of the National Health Planning Commission, said that it will focus on promoting the use of domestic medical equipment in the top three hospitals. The Minister of Industry and Information Technology also said that in order to promote the development of the domestic medical equipment industry, an incentive mechanism for active use of domestic medical equipment will be established. Earlier at the end of May, Xi Jinping inspected Shanghai Lianying Medical Technology Co., Ltd., saying that “some high-end medical equipment cannot be afforded at the grassroots level, and the people cannot afford it. It is necessary to speed up the localization of high-end medical equipment, reduce costs, and promote the continuous development of national brand enterprises†The Guards Committee has launched the selection of excellent domestic medical equipment. The first batch of equipment is digital X-ray machine, color ultrasound, automatic biochemical analyzer, and will continue to select other types of equipment in the second half of the year. In fact, as early as 2006, China Medical Equipment Association began the selection of excellent domestic equipment, but its selection results have been limited by the lack of policy support for a long time. With the gradual landing of specific policies, the attitude of domestic hospitals to domestic equipment procurement is expected to gradually change in the future. As a leading domestic digital X-ray machine, the company's existing and research products are expected to benefit from the improvement of the policy environment.
The product structure is continuously enriched, and the import substitution space is large: the company's current products are mainly divided into two major categories, one is magnetic resonance imaging equipment (MRI), including permanent magnet type and superconducting type; the second type is ray Products, including angiographic interventional systems, digital X-ray machines, digital gastrointestinal mirrors, etc. In terms of MRI, in the past, the company's sales were mainly based on low-end permanent magnets. Since the company's superconducting 1.5T production leather was approved for sale last year, sales have made breakthroughs. In the future, new products are expected to drive MRI products. Fast growth. In terms of ray products, the company's new digital X-ray machine has been launched, and it is expected to drive the rapid recovery of the company's overall sales together with the flat-panel DR. From the industry point of view, the current equipment foreign-funded enterprises have an absolute leading position, among which digital X-ray machine foreign-funded enterprises account for more than 85% of the market share, the situation in the MRI field is similar, in the future with domestic equipment in the technical level, product design, supporting Advances in services and other aspects, the industry has a huge import substitution space. In terms of product lines, the vehicle-mounted and mobile X-ray machines owned by the subsidiary China Resources Machinery are also important development directions for the company's ray products. After the completion of the business transformation related operations, we expect the company to actively seek to further improve the product structure through the outsourcing.
The ownership of the company changes, the company faces a new era: In the early period, Beifang Group and Yuyue Technology Development Co., Ltd. signed the “Share Transfer Agreement on the Transfer of China Resources Wandong Medical Equipment Co., Ltd.â€, China Resources Pharmaceutical Investment Co., Ltd. and Yu Yue Science and Technology signed the “Shanghai Property Rights Transaction Contractâ€, and Yuyue Technology will act as the transferee-related medical device-related assets to be transferred by the above-mentioned China Resources Group. Upon completion of the transaction, the controlling shareholder of China Resources Wandong will be changed to Yuyue Technology, and the property ownership will be transferred from state-owned enterprises to private enterprises. At the same time, because the company controlled by the actual controller, Yuyue Medical also involves the operation of the medical imaging business, in order to solve the possible horizontal competition problems between the two in the future, it is proposed to use the assets and personnel of the medical imaging diagnostic equipment. The contract was transferred to Wandong to realize the merger of the two companies' image business. At present, the share transfer is subject to the approval of the state-owned assets supervision department such as the State-owned Assets Supervision and Administration Commission of the State Council and the anti-monopoly review of the Ministry of Commerce. In terms of overall profitability, the company's net profit margin has remained at 5%-7% in recent years due to factors such as product structure and system, which is significantly lower than the industry level. We believe that with the change of ownership system, the company's operation will be more flexible, and then it will be reflected in the internal incentive mechanism and the extension of M&A expansion. Through the rational arrangement of core management personnel, the rationalization of internal incentive mechanism, and product pricing. The transformation of marketing concepts, the gradual development of outreach mergers and acquisitions, combined with the company's active cost control methods (such as streamlining personnel, production outsourcing, etc.), the company's operating efficiency has a certain room for improvement, a series of changes under the company's business is expected to welcome Inflection point, and then open a new era of growth.
The financial indicators were generally normal: During the reporting period, the company's financial indicators were generally normal. The accounts receivable at the end of the period was 211 million yuan, down 15.88% year-on-year, mainly due to the overall decline in the company's sales. The current operating net cash flow was -6.01 million yuan, which basically met the quarterly attribute of the company's cash flow, and improved compared with the same period of last year (the operating net cash flow in the same period last year was -90.76 million yuan). In terms of expenses, the company incurred sales expenses of 78.16 million yuan in the current period, down 8.01% year-on-year, corresponding to the expense ratio of 17.63%, up 0.29 percentage points year-on-year; management expenses were 72.79 million yuan, down 8.78% year-on-year, corresponding to the expense ratio of 16.42%, year-on-year increase 0.73 percentage points, taking into account the decline in the company's sales revenue, the overall expense rate control is normal.
Earnings forecast: On the whole, we believe that the incentive mechanism of the company is expected to be gradually rationalized after the ownership change, and the institutional restrictions of the extension expansion have been eliminated. The potential of the cost control marketing concept is also expected to drive the company's business to gradually recover. Although the internal integration of enterprises requires a certain process, in view of the inefficient operation of the company's previous receptor system, there is still room for improvement in operating efficiency under the relevant policy background of the country's encouragement of domestic medical equipment and the company's own multiple changes. We give the company EPS of 0.18, 0.24, 0.30 for 2014-2016, and the corresponding valuation is 112, 86, 67 times. Although the company's current valuation is high, the overall operating results this year are not good, but the internal management improvement and incentives in the future. The actions of mechanism reform and extension expansion are worthy of expectation. The company's operation is expected to usher in an inflection point. We give the company an “overweight†rating.
Risk Warning: The implementation progress of equity transfer was lower than expected, the performance improvement was lower than expected, and the internal integration and outreach expansion was lower than expected.
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